News Analysis
ISSUE 3 September 2012
into account under the business model.
development money or impact investors are
well as understanding the investment needs
original capital for new projects which, with
Large investments are required and it is
imperative to find the right local partners, as in complementary local infrastructure. This said, financial aid exists in the form of aid
banks, and strong local business partners. An
important barrier is that smaller projects will
often struggle to secure financing as the sums
involved don’t justify the transaction costs from a banks perspective. The pooling of funding
for smaller projects, or the use of seed funding which can be recycled into new projects were offered as potential solutions.
Cost reduction strategies include the
maximisation of low-cost local manufacturing, while good policy design can help spur the development of larger local markets with
improved cost competitiveness. For instance,
switching telecoms towers power supply from diesel to renewables often makes economic
sense today on a standalone basis, but policies to encourage or require analysis of the
expansion of this type of project to consider the opportunities for rural for local electrification
at the same time can offer significant synergies and cost reductions.
Finally, tips where given on how to
structure the business model. Participants
highlighted the need to structure models in a way that helps facilitate securing investment capital, particularly by ensuring that a
reasonable financial return to investors can be achieved. This requires sustainable cost
recovery at end-user level. Building in a clear element of cost recovery, event in donor-
funded projects maintains an expectation to
involved, cost recovery can slowly increase to
cover the full cost of the project, freeing up the the experience of successful cost recovery, will attract a lower risk premium.
And last, but not least, the conference
reviewed next steps. Participants highlighted the importance of the ongoing effort create a standard certification and labelling
framework for small wind turbines in order
to reduce uncertainty and simplify banks risk
assessments. In an effort to highlight the role of
wind energy in rural electrification, the Alliance for Rural Electrification has published a best
practices publication. Similar publications on the uses and lessons learned of hybrid minigrids have been published to assist policy-
makers and practitioners. The work of IRENA on standards, the global wind resource atlas, capacity building in developing countries
and on costing was acknowledged as making an important contribution to accelerating deployment.
In addition to synthesising the results for
wind power, biomass, solar PV, concentrating solar power and hydropower, IRENA also
drew attention to its research on the costs
of renewable options for transportation and
plans in 2013 to look at the costs of renewable
technologies and energy sources for stationary applications. IRENA continues its work on
capacity building, energy planning, energy
scenarios, renewable readiness assessments and technology transfer.
For more information on the Wind Power Economics and Business
pay which protects will help ensure supply
Models conference and renewable energy please visit IRENA’s website at
that can reduce a funders perceived assessment
www.irena.org/publications
over the lifetime of the project is maintained, while it will also provide concrete examples of project risk and therefore help secure
funding on more reasonable turns. Where
www.irena.org. To download for free the five power generation costing reports got to For further information contact Michael Taylor mtaylor@irena.org
15